Retail grocery unit spurs growth at TreeHouse

by Eric Schroeder
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OAK BROOK, ILL. — Solid operating performance within the North American Retail Grocery business combined with strong results from acquisitions completed in 2010 led earnings higher at TreeHouse Foods, Inc. in the first quarter ended March 31. Net income in the quarter was $19,808,000, equal to 56c per share on the common stock, up 21% from $16,319,000, or 49c per share, in the same period a year ago.

Net sales rose 24% to $493,513,000 from $397,124,000.

“We had a strong start to the year on the top line and are encouraged by our progress,” said Sam K. Reed, chairman and chief executive officer. “Our legacy businesses turned in very good volume growth. Excluding discontinued branded infant feeding, our legacy retail grocery segment realized a 4% increase in organic revenue growth, its best net sales increase since its formation in 2005. Sturm Foods and S.T. Specialty Foods, our most recent acquisitions, reported excellent performance as well. Private label continues to deliver value and quality to our customers and their consumers, and we are well positioned to continue our growth.

“While we benefited from favorable forward positions on agricultural commodities in the first quarter, these benefits were more than offset by a rising energy environment that drove freight and fuel expenses significantly higher than anticipated. However, we have aggressive plans in place to recover these costs through price increases during the remainder of the year.”

Operating income within North American Retail Grocery increased 56% to $65,521,000, while sales rose 35% to $353,463,000. TreeHouse said soup sales were up in the mid single digits over last year with Mexican sauces, aseptic sauces, hot cereals, powdered drinks and jams and spreads showing good sales growth.

In the Food Away From Home segment, operating income rose 14% to $10,762,000, while sales were narrowly higher, at $74,227,000, compared with $73,427,000 in the same period a year ago.

Providing his outlook for 2011, Mr. Reed said TreeHouse still expects to meet its original operating earnings projections for the year.

“I am reassured by the strength of our new businesses, our outstanding first-quarter revenue growth, and plans for further pricing actions later this year,” he said. “The early success of our systems implementation work has given us both the resources and confidence to accelerate the conversions of our Sturm Foods and S.T. Specialty Foods acquisitions, while still maintaining an aggressive rollout to our plants and distribution centers. This acceleration will require an additional investment in 2011 of approximately $5 million or 10c per share in earnings per share in operating expenses compared to our original plans. In accordance with this additional investment, we are revising our 2011 full-year earnings guidance to a range of $3 to $3.08 in adjusted earnings per share.”

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